CHICAGO, Nov 14 (Reuters) - A bill to consolidate hundreds of local public safety worker retirement systems in Illinois to ease funding pressures on municipalities won final approval in the state legislature on Thursday.
Ballooning pension liabilities for some cities in the nation’s sixth most populous state have led to budget cuts, tax increases, asset sales and credit rating downgrades.
The measure consolidates about 650 police and firefighter pension funds into two statewide funds in an effort to reduce administrative costs and boost investment returns. It passed the Senate in a 42-12 vote, following the House’s 96-14 vote on Wednesday.
Democratic Governor J.B. Pritzker, who championed the plan, called the bill’s passage “a vital step forward for our fiscal future.”
“Working together we have put hundreds of cities in Illinois on a path toward alleviating their massive property tax burdens and just as importantly, we’ve begun to show Illinois can tackle its most intractable problems,” Pritzker told reporters following the Senate vote.
Illinois’ credit ratings, at a notch or two above the junk level, are the lowest among the states, due in part to its own $133.5 billion unfunded pension liability.
The governor said a task force he created after he took office in January will work on addressing state pensions and those of Chicago, which was not included in the consolidation and where escalating pension contributions led in part to an $838 million deficit in the city’s fiscal 2020 budget. Mayor Lori Lightfoot has said she is seeking unspecified state help for pensions.
The consolidation plan, which Pritzker unveiled last month, received initial pushback from some groups, including the Illinois Fraternal Order of Police, which came on board after changes were made to the legislation, including giving labor increased representation on the new pension boards.
The bill does not affect the ability of a local retirement system to seek state withholding of revenue allocated to a municipality because pension contributions fell below required levels, according to the Illinois Senate president’s office. That process has been undertaken by pension funds in a few cities, including Chicago.
The aggregate funded ratio for firefighter and police retirement systems outside of Chicago fell to 55.47% in 2017 from 57.58% in the prior year, according to a July report from the state legislature’s Commission on Government Forecasting and Accountability. Unfunded liabilities rose by $1 billion to $11 billion.
Reporting By Karen Pierog; Editing by Steve Orlofsky